We at W Gowri & Associates cater to the needs of all sorts of Income tax consultancy and return filing services.
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Simple hassle free processing.End to end follow up service.Quick service. complete online processing. As per section14 of the Income Tax Act, for the purpose of charging of tax and computation of total income, all incomes are classified under the following 5 Heads of Income.
Salaries.House Property.Profits and Gains of Business of Profession. Capital Gains. Other Sources.Income tax is levied on the income earned by all the individuals, HUF, partnership firms , LLPs and Corporates as per the Income tax Act of India. In the case of individuals, tax is levied as per the slab system if their income is above the minimum threshold limit (known as basic exemption limit.
Indian Income tax levies tax on individual taxpayers on the basis of a slab system. Slab system means different tax rates are prescribed for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country. Such income tax slabs tend to undergo a change during every budget.These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual “taxpayers such as:
Individuals (aged less than of 60 years) including residents and non-residents.Resident Senior citizens (60 to 80 years of age)Resident Super senior citizens (aged more than 80 years) In this new regime, taxpayers has an OPTION to choose either :
1. To pay income tax at lower rates as per New Tax regime on the condition that they forgo certain permissible exemptions and deductions available under income tax, Or2. To continue to pay taxes under the existing tax rates.Theassessee can avail rebates and exemptions by staying in the old regime and paying tax at the existing higher rate.Income tax slab rate applicable for New Tax regime – FY 2020-21.
| Income Tax Slab | New Regime Income Tax Slab Rates for FY 2020-21 (Applicable for All Individuals & HUF) |
| Rs 0.0 – Rs 2.5 Lakhs | NIL |
| Rs 2.5 lakhs- Rs 3.00 Lakhs | 5% (tax rebate u/s 87a is available) |
| Income Tax Slab | New Regine income Tax Slab Rates for FY 2020-21 (Applicable for All Individuals & HUF) |
| Rs. 3.00 lakhs – Rs 5.00 Lakhs | |
| Rs 7.5 lakhs – Rs 10.00 Lakhs | 15% |
| Rs 10.00 lakhs – Rs. 12.50 Lakhs | 20% |
| Rs. 12.5 lakhs- Rs. 15.00 Lakhs | 25% |
| > Rs. 15 Lakhs | 30% |
Difference of slab rates between New tax regime vs Old Tax regime
Please note that the tax rates in the New tax regime is the same for all categories of Individuals, i.e Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years , and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.Individuals with Net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A i.e tax liability will be nil of such individual in both – New and old/existing tax regimes.Income tax slabs for Individual aged below 60 years & HUF.
| Income Tax Slab | Individuals Below The Age Of 60 Years – Income Tax Slabs |
| Up to Rs 2.5 lakhs | NIL |
| Rs. 2.5 lakh -Rs. 5Lakhs | 5% |
| Rs 5 .00 lakh – Rs 10 lakhs | 20% |
| > Rs 10.00 lakh | 30% |
| Income Tax Slab | Existing Regime Slab Rates for FY 19-20 and FY 20-21 | New Regime Slab Rates for FY 20-21 | ||
| Resident Individuals & HUF < 60 years of age & NRIs | Resident Individuals & HUF > 60 to < 80 years | Resident Individuals & HUF > 80 years | Applicable for All Individuals & HUF | |
| Rs 0.0 – Rs 2.5 Lakhs | NIL | NIL | NIL | NIL |
| Rs 2.5 – Rs 3.00 Lakhs | 5% (tax rebate u/s 87a is available) | NIL | NIL | 5% (tax rebate u/s 87a is available) |
| Rs. 3.00- Rs 5.00 Lakhs | 5% (tax rebate u/s 87a is available) | NIL | ||
| Rs. 5.00 – Rs 7.5 Lakhs | 20% | 20% | 20% | 10% |
| Rs 7.5 – Rs 10.00 Lakhs | 20% | 20% | 20% | 15% |
| Rs 10.00 – Rs. 12.50 Lakhs | 30% | 30% | 30% | 20% |
| Rs. 12.5 – Rs. 15.00 Lakhs | 30% | 30% | 30% | 25% |
| > Rs. 15 Lakhs | 30% | 30% | 30% | 30% |
The taxpayer opting for concessional rates in the New Tax regime will have to forgo certain exemptions and deductions available in the existing old tax regime. In all there are 70 deductions & exemptions that are not allowed, out of which the most commonly used are listed below:
List of common Exemptions and deductions “ not allowed” under New Tax rate regime.
Leave Travel Allowance (LTA)House Rent Allowance (HRA)Conveyance allowanceDaily expenses in the course of employmentRelocation allowanceHelper allowanceChildren education allowanceOther special allowances [Section 10(14)]Standard deduction on salaryProfessional taxInterest on housing loan (Section 24)Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2))Transport allowance for specially abled peopleConveyance allowance for expenditure incurred for travelling to work.Investment in Notified Pension Scheme under section 80CCD(2)Deduction for employment of new employees under section 80JJAADepreciation u/s 32 of the Income-tax act except additional depreciation.Any allowance for travelling for employment or on transferThe new tax regime can largely benefit middle class taxpayers who have a taxable income upto Rs 15 lakh. Old regime is a better option for high-income earners.
The new income tax regime is beneficial for people who make low investments. As the new regime offers seven lower income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, assessee having total income before deduction up-to Rs 12 lakh will have higher tax liability under the old system if they have investments less than Rs 1.91 lakh. Therefore, if you invest less in tax-saving schemes, go for the new regime.
That being said, if you already have in place a financial plan for wealth creation by making investments in tax-saving instruments; mediclaim and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan ;buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.
In light of the above and considering the new income tax regime, if taxpayers want to opt for the concessional tax rates, they may evaluate both regimes. Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one as it may vary from person to person.
Let’s take an example of comparing the Old & New tax regime of an assessee with Rs 10 Lakh income.
Mr. Rahul has a salary income of Rs 10 lakh. His total investment u/s 80C is Rs 1.7 lakh under ELSS, PF, LIC premium and principal installment of home loan. Further he pays Medical insurance for himself and his wife of Rs 28000. If he opts for the old tax regime, then he can claim the above deductions, however if he wishes to go for a new tax regime than these deductions will not be available. He has paid home loan interest of Rs 75000 in FY 20-21. Let us see the tax outflow in both the regimes
| Particulars | Old Tax Regime (Rs) | New Tax Regime (Rs) |
| Gross Income | 1,000,000 | 1,000,000 |
| Deductions: | ||
| u/Sec: 80C | 150,000 | – |
| u/Sec: 80D | 25,000 | – |
| u/Sec: 24(b) | 75,000 | – |
| Taxable Income | 75,000 | 1,000,000 |
| Tax Slab (OLD) | ||
| 0 to 2.5 Lakh | - | – |
| 2.5 to 5 Lakh @ 5% | 12,500 | – |
| 5 Lakh to 10 Lakh @ 20% | 50,000 | – |
| > 10 Lakh @ 30% | - | – |
| Particulars | Old Tax Regime (Rs) | New Tax Regime (Rs) |
| Tax Slab (NEW) | ||
| 0 to 5 Lakh | – | – |
| 2.5 to 5 Lakh @ 5% | – | 12,500 |
| 5 to 7.5 Lakh @ 10% | – | 25,000 |
| 7.5 Lakh to 10 Lakh @ 15% | – | 37,500 |
| 10 Lakh to 12.5 Lakh @ 20% | – | – |
| 12.5 Lakh to 15 Lakh @ 25% | – | – |
| > 15 Lakh @ 30% | - | – |
| Income Tax | 62,500 | 75,000 |
| Cess @ 4% | 2,500 | 3,000 |
| Total Tax Outgo | 65,000 | 78,000 |
As per illustration above, if the gross income is more than Rs 10 lakh or and deductions u/S 80C, 80D, and 24(b) of the Income Tax Act are availed , then older regime is more beneficial from tax planning standpoint. While for individuals in the middle-income group, earning a gross income of say Rs 5 lakh; the new tax slab regime may prove advantageous.
| Nature of Income | Time of Selection of option of old vs new regime |
| Income from Salary or any other head of income attracting TDS |
An employee can opt to choose for the new tax regime and intimate their employer at the beginning of FY 2020-21 . Employees can change the option of selecting the tax regime every year However if new tax slab regime is opted at the begning of the year, it cannot be changed anytime during the year for TDS purpose, however the option can be changed at the time of filing of Income-tax return. |
| Income from Business & Profession | In case of Business or profession income , the option to choose between the tax regimes is available only once for a particular business. |
| Particulars | Existing / Old regime Tax rates | New Regime Tax rates |
| Company opts for section 115BAB (not covered in section 115BA and 115BAA) & is registered on or after October 1, 2019 and has commenced manufacturing on or before 31st March, 2024. | – | 15% |
| Company opts for Section 115BAA , wherein the total income of a company has been calculated without claiming specified deductions, incentives, exemptions and additional depreciation | – | 22% |
| Particulars | Existing / Old regime Tax rates | New Regime Tax rates |
| Company opts for section 115BA registered on or after March 1, 2016 and engaged in manufacture of any article or thing and does not claim deduction as specified in the section clause. | – | 25% |
| Turnover or gross receipt of the company is less than Rs. 400 crore in the previous year 2018-19 | 25% | 25% |
| Any other domestic company | 30% | 30% |
Please refer to the new sections for checking the applicability for above concessional income tax rates.
Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases. Surcharge applicable for companies is as below:
A partnership firm/ LLP is taxable at 30%.
* 12% Surcharge is levied on incomes above Rs 1 crore. Health and Education cess at the rate of 4 % Note- There are no concessional rates introduced for firms / LLPs in nex tax regime.
Income tax slab for Individual aged below 60 years & HUF
| Income Tax Slab | Tax Rates for Individual & HUF Below the Age Of 60 Years & NRIs |
| Up to ₹2,50,000* | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Income tax exemption limit is up to Rs.2,50,000 for Individuals , HUF below 60 years aged and NRIs for FY 2018-19 An additional 4% Health & education cess will be applicable on the tax amount calculated as aboveInvest Now & Save Upto ₹ 46,800 on Taxes
Income tax slab for Individual aged below 60 years & HUF
| Income Tax Slab | Tax Rates for Individual & HUF Below the Age Of 60 Years |
| Income up to Rs 2,50,000* | No tax |
| Income from Rs 2,50,000 – Rs 5,00,000 | 5% |
| Income from Rs 5,00,000 – 10,00,000 | 20% |
| Income more than Rs 10,00,000 | 30% |
An additional 4% Health & education cess will be applicable on the tax amount calculated as above Surcharge applicability:
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